Boeing’s 737 MAX Faces Another Potential Risk, This Time From Europe

When it comes to the Boeing 737 MAX, investors have largely focused on when the troubled jet will return to service. But, like with most issues related to the MAX, that process might not be as simple as investors would hope.

Europe’s chief aviation regulator—the sister agency to the U.S. Federal Aviation Administration—gave a presentation to the European Parliament Transport and Tourism committee on Tuesday. In it, the European Union Aviation Safety Agency, or EASA, sheds new light on several
Boeing
(ticker: BA) 737 MAX issues. More important, it raises the possibility of a new risk for Boeing investors: That different aviation authorities around the globe lift the flying ban at different times.

That makes sense—no local aviation authority will outsource safety to another country. Still, it is better for Boeing if regulators can agree.

In a letter sent to the FAA on April 1, detailed in Tuesday’s presentation, EASA outlined its conditions for MAX re-entry to service and said it is committed to doing its own review of proposed design changes and wants crews “adequately trained.”

EASA could require more pilot training, regardless of what the FAA decides. “It’s probably not a major delay, but MAX [simulation] training could require payment from Boeing to airline customers,” Teal Group aerospace consultant Richard Aboulafia told Barron’s last week.

Potential training isn’t a new issue. In fact, all of the concerns outlined by EASA are known issues. That’s a silver lining for investors who have been bombarded by MAX headlines.

Along with pilot instruction, the EASA report discusses MCAS, short for maneuvering characteristics augmentation system; angle of attack, or AOA, sensors; and the trim stabilizer wheel. (The trim stabilizer wheel is the emergency crank system that can be physically difficult to turn.)

Of those three, EASA seems to be most concerned about the AOA sensors. “Still no appropriate response to Angle of Attack integrity issues,” reads one of the presentation slides. That doesn’t mean Boeing isn’t working to address the issue. Investors, however, would obviously feel better if the solution was already in place.

EASA declined to comment about the 737 MAX grounding and referred Barron’s to Boeing about any hardware, software, or training changes being contemplated. Boeing, for its part, said in an emailed statement, “We continue to work with the FAA and global regulators on addressing their concerns to safely return the MAX to service.”

The presentation does indicate progress is being made. For instance, flight tests on a modified 737 MAX at the Boeing flight test center are coming and represent a “major milestone,” according to EASA.

Ultimately, it is difficult to say what the EASA report specifically means for Boeing’s timeline. Safety regulators, and Boeing, have been tight-lipped. Boeing’s best guess, given when the company reported second-quarter earnings in July, is the MAX will fly again commercially by the end of 2019.

Von Rumohr believes it is best if global aviation authorities can agree with one another, “but the FAA is the most important regulator for Boeing.” The majority of Boeing 737 MAX backlog is destined for U.S. routes. He believes the FAA will be the first aviation authority to act on the MAX grounding, even if EASA doesn’t follow suit immediately.

This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.